The latest analyst coverage could presage a bad day for Laredo Petroleum, Inc. (NYSE:LPI), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. There was a fairly draconian cut to their revenue estimates, perhaps an implicit admission that previous forecasts were much too optimistic.

Following the latest downgrade, the current consensus, from the four analysts covering Laredo Petroleum, is for revenues of US$1.3b in 2023, which would reflect a concerning 34% reduction in Laredo Petroleum's sales over the past 12 months. Statutory earnings per share are anticipated to dive 22% to US$34.42 in the same period. Prior to this update, the analysts had been forecasting revenues of US$1.5b and earnings per share (EPS) of US$34.56 in 2023. So there's been a clear change in analyst sentiment in the recent update, with the analysts making a substantial drop in revenues and reconfirming their earnings per share estimates.

See our latest analysis for Laredo Petroleum

The consensus has reconfirmed its price target of US$87.25, showing that the analysts don't expect weaker sales expectationsnext year to have a material impact on Laredo Petroleum's market value. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. The most optimistic Laredo Petroleum analyst has a price target of US$127 per share, while the most pessimistic values it at US$71.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We would highlight that sales are expected to reverse, with a forecast 28% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 14% over the last five years. Yet aggregate analyst estimates for other companies in the industry suggest that industry revenues are forecast to decline 6.8% per year. The forecasts do look bearish for Laredo Petroleum, since they're expecting it to shrink faster than the industry.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with analysts reconfirming that earnings per share are expected to continue performing in line with their prior expectations. Unfortunately they also cut their revenue estimates for next year, and they expect sales to lag the wider market. That said, earnings per share are more important for creating value for shareholders. Given the stark change in sentiment, we'd understand if investors became more cautious on Laredo Petroleum after today.